Getting started as OO, should I factor?

factoring doesn't gaurantee you get paid. You will get the money for your invoice, but if the broker doesn't pay up the factoring company will take it out of your next settlement or freeze your account until you pay them.

Because they have this power, they may not even try to hard to collect for you. My experience with factoring was not only is it a huge ripoff, but it also makes collections harder for you, not easier.

 

I have been an owner operator with my own authority for the past three years. I would definitely recommend that you factor. Many of the brokers offer a factoring rate of 1 to 5 percent with a "quick pay" option. These are companies like TQL, C.H. Robinson, Coyote Logistics and such. Those are fine, but you will encounter those brokers that don't offer a quick pay,and offer only thirty days from the day they receive the original bill of lading.

When booking loads and looking at brokers on the load boards, especially if using Get Loaded, you will notice a credit score. It the credit score is below 95, consider factoring. You will also notice that the load board will list if these companies can be factored and will see Loves or TBS listed, which generally means they have been pre-approved.

We use TBS and have done so since the beginning. They charge 5% of the invoice and, unless and original BOL is needed, they will pay from faxed and emailed papers and pay withing 24 to 48 hours depending on when they received the paperwork. You do not have to factor all you clients through them, but if you factor Company A, then you will need to keep factoring Company A with them.

Consider this also, since we started with TBS as non-recourse factoring, they have had to chase or eat close to $30,000 in non pay or delinquent pay. Could you afford to take that kind of loss?

 

I disagree. If you do non-recourse factoring with a legitimate factoring company, like TBS or Loves, you will not be charged back any money not paid by the broker. Since we started factoring with TBS over three years ago, they have had to eat $30,000 from no-pay brokers. However, they are able to financially weather this and use collection agencies to pursue the broker. We have only lost the 5% for the factoring fee.

 

I had my authority for a year and a half and dont factor,always got paid.the key is to limit the number of brokers u work with,i rather haul a load two or three hundred dollars cheaper than take a risk on the higher paying freight from 95 credit rated broker.

 

I have to make a correction to my above post. I misunderstood my wife when it came to outstanding balances. First of all TBS has been able to collect all monies owed from all the various brokers we have dealt with. However, there are times when some of those monies have gone sixty to ninety days before being paid. We would not be able to stay in business with not being paid for sixty to ninety days on sizable amounts of money. To keep the cash flowing, for us it is better to factor.

My apologies for posting misleading information.

 

No...

Factoring should be outlawed. It's for people who don't understand time value of money and can't do math. It's loan sharking at it's finest. I'm sure that's gonna hurt some feelings, but that doesn't change the fact's. You're running a business now. Business's don't run on feelings. They run on sound business decisions.

5% factoring for 30 days is 60% apr. If you run 100k miles and avg $2/mile factoring will cost you $10,000 per year.

 

Let's say you factor half of your loads per month. 3% from 10k is $300. For $300 they do all the invoicing, you have cash flow and use their fuel card, which saves you $200 per month, because of their discount. You also get to use their broker credit ratings, which saves you another $35 from loadboard. So basically factoring pays for itself